Friday, October 31, 2008

Vietnam gov’t to tighten belt next year: official

Deputy Head of the National Assembly’s Budget Committee Trinh Huy Quach gave Thanh Nien an interview Wednesday on the government’s plan for next year given the recent global financial turmoil.

Excerpts from the interview follow:

Thanh Nien: The government has created a budget plan for 2009 that assumes the price of crude oil to be US$90 per barrel. However, crude price has dropped to below $70 per barrel recently. Was there a backup plan to cover the price plunge, which is estimated to result in the loss of millions of dollars?

Trinh Huy Quach: It’s extremely difficult to predict crude oil price right at the moment. Three months ago, international experts said the price could increase to $200 per barrel. However, the price has dropped to under $70 and some experts say it could drop to under $50.

The NA’s Budget Committee is working with the government to make suggestions to cover that shortfall. If crude oil price remains at $70 per barrel, we will have to increase tax on imported fuel as well as reduce investment in infrastructure construction and other sectors.

Could you give more details about these contingent plans?

We will hold thorough discussions about reducing investment in projects that haven’t completed required procedures, suspending less urgent ones, and cutting support for some corporations.

The government has also proposed to increase basic salary starting the second quarter of next year, but if the situation [crude oil price] lingers, the proposal could be postponed or altered to reduce the salary increase rate.

Does the plan to implement better supervision and management of state-owned corporations mention the possibility of decreased aid from the government budget?

Managing the capital of state-owned corporations has attracted wide public interest. The NA will supervise this issue and provide an appropriate report.

What about reducing public investment; will it be included in next year’s plan?

According to the Budget Committee’s report, the government has been active in curbing ineffective projects. But the purpose was not to reduce investment but to transfer money to more urgent projects. This policy will be repeated in 2009 to increase the effectiveness of public investments.

So government debts will not be a major concern in 2009?

The government has reported overspending equal to 4.8 percent of GDP. The Budget Committee has said this trend would exacerbate inflation, if the rate remains at around 5 percent year after year.

Not every country creates surplus, especially developing ones. Is it normal that loans increase in accordance with high capital demand?

It’s normal to borrow for investments, especially for projects that would bring about effective socioeconomic benefits. However, it becomes a problem when overspending persists for years. But not all investments drawn from the government budget will gain expected results.